Guggenheim Downgrades GreenSky After Underwhelming Q1, Says Positives Are Baked Into Stock

GreenSky Inc GSKY reported disappointing first-quarter revenue Tuesday on softer-than-expected transaction volumes.

Although the company’s underlying business momentum is good, it's already reflected in the stock following a rally year-to-date, according to Guggenheim Securities.

The Analyst

Jeff Cantwell downgraded GreenSky from Buy to Neutral and removed the prior price target.

The Thesis

GreenSky’s first-quarter total revenue of $104 million missed Guggenheim's forecast by 3 percent, while transaction volumes of $1.24 billion came in lower than the sell-side firm's $1.28-billion projection, Cantwell said in the Wednesday downgrade note. (See his track record here.) 

At $19 million, adjusted EBITDA beat Guggenheim's $18-million estimate, mainly due to lower FCR liability expense, the analyst said. 

GreenSky maintained its 2019 revenue guidance at $538-$572 million and its transaction volume forecast at $6.4-$6.8 billion.

Guggenheim lowered estimates for 2019 from the previous high end of the guidance range toward the mid-to-low end. The firm reduced its transaction volume and revenue estimates for 2019 from $6.8 billion to $6.5 billion and from $568 million to $549 million, respectively.

The EPS estimates for 2019 and 2020 have been lowered from 72 cents to 69 cents and from 96 cents to 90 cents, respectively.

“While we will continue to have a generally positive view of the company's strategy, competitive positioning, and ability to execute against management's stated objectives, we believe these elements are largely contemplated in the shares' current price,” Cantwell said.

Price Action

GreenSky’s stock has appreciated around 52 percent year-to-date. The stock was trading down 1.34 percent at $13.98 at the time of publication Wednesday. 

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